[ucaetano]

Companies don't have "ad budgets". Those depend on the efficiency of the ads. If your $100M spending on ads only generates $50M in value, you won't spend it.

Advertising has diminishing returns, when you decrease the efficiency of advertising, you decrease the spending.

Another way to think about it: line up every marginal $ you could possibly spend in ads, and sort it by efficiency from max to min. Find the point where efficiency = 100% (spending $1 more generates $0 marginal profit).

As a company, you'd buy all the ads until that point.

When you lower the efficiency of the ads, the intersection moves, lowering the marginal returns, and resulting in lower ad spending.